Margin (the difference between what you sell a good or service for and the cost to you to provide that good or service) is a much more important concept for har

Margin (the difference between what you sell a good or service for and the cost to you to provide that good or service) is a much more important concept for hardware. With software, most of the costs go into building it. Getting more customers brings in more money but doesn’t cost you more (ignoring marketing and customer service etc costs). Even if you have hosting costs, those are typically vanishingly small compared to developer salaries invested in building it. So as your customer base grows, the cost of what you’re selling to each new customer tends towards zero. Hardware has a fixed cost for every unit sold, which is usually a large percentage of the price at which you sell to the customer. Every new unit you sell costs you additional money to produce. Yes, there can be economies of scale; but ultimately every unit costs something. And marketing/customer service costs are on top of that. That means margins are lower, so it takes more money invested to make the same amount of profit. What’s more, risk is higher with hardware compared to software (at least the way most software is distributed these days). If the first version of your software is something nobody will buy, you can iterate, and it still might get customers with some changes, so that the initial investment in it isn’t a waste. If the first version of your hardware won’t sell at all, you typically can’t convert those units you’ve already paid for into the second version that people will pay for. You’ve sunk not just R&D costs like you do with both hardware and software but also production costs. Finally, a lot of software lends itself better to a subscription model than hardware does. And consumers are more familiar and comfortable with that model for software than hardware (though it’s conceivable that that could change, subscription models for hardware are a really raw deal for customers.) When you buy a dishwasher, you expect to have to pay for water and electricity to operate it on an ongoing basis; but not to also have to keep paying the manufacturer. The subscription model magnified the scalability of a product because it allows you to keep making money off the product without spending more on it. For physical products purchased frequently, that means higher costs/lower margins on an ongoing basis. For physical products purchased infrequently, that means no recurring income from the initial investment.